Members of the European Parliament in Strasbourg passed a law Tuesday to strengthen EU curbs on CO2 emissions from industrial sites, in order to comply with Paris climate accord commitments.

The text was approved by 535 votes to 104, with 39 abstentions.

The new law, already informally agreed upon by EU ministers, will accelerate the withdrawal of emission allowances available on the carbon market, which covers around 40 percent of EU greenhouse gas emissions, according to the European Parliament

“The ETS remains the cornerstone of our EU policy to combat climate change,” said rapporteur Julie Girling, an MEP from the UK. “We have done our best to agree on an ambitious update. The ETS has had many detractors over the years. We tackled most of the problems – from a carbon price that was clearly too low to make the market function, to the extremely difficult issue of striking the balance between our environmental ambition and the protection of an energy-intensive European industry,” Girling added.

The law provides for an increase in the yearly reduction of emission allowances to be placed on the market (the so-called “linear reduction factor”) by 2.2 percent from 2021, up from the 1.74 percent planned at present. This factor will also be kept under review with a view towards a further increase by 2024 at the earliest.

The law also provides for a doubling of the ETS Market Stability Reserve’s capacity to mop up excess emission allowances on the market. When triggered, it would absorb up to 24 percent of excess allowances in each auctioning year for the first four years,  and thus increase their price by adding to the incentive to reduce emissions, the European Parliament said.

According to the new law, two funds will help foster innovation and spur the transition to a low-carbon economy. Moreover, a modernisation fund will help to upgrade energy systems in lower-income EU member states. MEPs tightened up the financing rules so that the fund is not used for coal-fired projects, except for district heating in the poorest member states.

An innovation fund will provide financial support for renewable energy, carbon capture and storage and low-carbon innovation projects.

The law also aims to prevent “carbon leakage”, i.e. the risk that companies might relocate their production outside Europe due to emission reduction policies. The sectors at the highest risk will receive their ETS allowances for free. Less exposed sectors will receive 30 percent for free.